Neutral Citation No:  IEHC 34
THE HIGH COURT
SILVER WRAITH LIMITED
SIUICRE EIREANN C.P.T.
TRANSCRIPT OF JUDGMENT DELIVERED BY THE HONOURABLE MR JUSTICE RONAN KEANE ON 8TH JUNE 1989
The first question that has to be determined in this case is whether there was a concluded and enforceable agreement between the parties. In relation to that question, it seems to me that the parties seem to be in agreement that, if there was such a concluded agreement, it was reflected in the letter of 30th June 1986 and the reply thereto of 7th July 1986.
The protagonists (if I can call them that) on both sides (Mr. John Gray for the Defendant and Mr. Frank Murray for the Plaintiff) recorded, as one would expect, their understanding of the situation between them at that stage in those letters. In other words, it is not seriously in dispute between the parties that the letters reflected the state of play between them. This is of considerable importance because all this happened some three years ago and it would be unreasonable to expect either of the persons principally concerned to remember the minutae of the conversations they had prior to that exchange of letters. Therefore, it is entirely to be expected that they would record their understanding of the situation in those letters.
It then becomes of crucial importance from the Court's point of view to see whether those letters establish a concluded and binding agreement. It is for that reason that much of the cross-examination on both sides was directed to the contents of those two letters; and in their closing submissions Counsel directed much of their observations to what was contained in those letters.
I commence with the letter of 30th June 1986 addressed to Mr Murra) from Mr Gray, which says: "Further to your correspondence and subsequent discussions ... the following terms are acceptable subject to full lease being agreed. Now, what was intended to be conveyed by the phrase 'subject to full lease being agreed' and what did Mr Murray for his part understand by it? If one leaves the legalities aside for the moment, I think that any lay person reading that correspondence would not have much difficulty in inferring from that phrase that Mr. Gray was seeking to convey to his opposite number in these discussions that, while he was proceeding to set out terms which he (Mr. Gray) understood were acceptable to both of them, he was conveying that in the normal course of event, if the parties were ad idem on the main features of the lease (the rent, the length of the term and when the term was to commence) the matter should go to their respective solicitors; that a full lease containing all the covenants and conditions that might be appropriate in such a lease would then be drawn up , considered by their solicitors, possibly amended between them and that eventually from discussions between the solicitors an agreed lease which both parties were prepared to execute would emerge. Mr. Gray was seeking to convey to Mr. Murray that until that time his principals would not in any contractual sense be bound. That, I think, was what, without any knowledge of the various decisions relating to the equivalent phrase, a lay person of common sense and experience of business affairs would suppose Mr Gray intended to convey. In saying that I am assuming that any person reading the correspondence would have the same knowledge that I have of the context and background against which those letters were written.
This was not somebody offering to give a letting of a furnished bed-sittingroom. This was an officer of a large public company, a semi-State body, who was dealing with the lease of an extremely important and valuable property in a very commanding and prestigious situation in the most exclusive business area of Dublin. And in my view it would be extraordinary if a person in Mr Gray's position would have felt himself at liberty to incorporate all the final and concluded details of a lease of this property in this form and then treat anything that was done thereafter as a pure formality because the parties were fully contractually bound. I would find that an astonishing proposition and I think that most people reading the letter without any particular detailed knowledge of the legal back-ground to this particular area of the law would have got that impression.
It is important to distinguish two matters here. What one is now concerned with is whether there was a concluded agreement between the parties and not whether there was a sufficient note or memorandum of the agreement to satisfy the Statute of Frauds because that only becomes relevant if there is a concluded agreement in the first place. So that in considering what inference one should draw from the phrase 'subject to full lease being agreed', at this stage one is not considering whether it would be fatal to the existence of a note or memorandum. The point is: What does it suggest in relation to the contracting state of mind, as it were, of the parties?
In that context there is a second matter which is of importance. The phrase used must be carefully distinguished from the phrase 'subject to contract' which is dealt with in the authorities here and in England. Those authorities have been concerned with situations where parties, usually lay parties or estate agents, had settled the terms of a purchase of property and then went to their solicitors and asked them to carry through the sale; and the solicitors, conscious of the fact that it might be dangerous for their clients to be bound by a purely oral contract, would write to their opposite number a letter headed 'subject to contract' and go on to say: 'We confirm the sale of this property etc.'.
Now, even in those circumstances it has sometimes been held that that is sufficient to prevent a sufficient note or memorandum to come into existence to satisfy the Statute of Frauds. But if one looks at the authorities, one finds that in those cases there had been a complete agreement, that the parties to the transaction had not in mind anything at all about it being subject to contract. It was their solicitors who subsequently put the phrase into the correspondence.
However, in this situation it is totally different. If these letters reflect (as I said at the outset, it is virtually agreed that they do) the actual state of mind of the parties at the time, then the coming) into existence of a full lease is unquestionably a condition of the agreement and there is no question here of the phrase being subsequently inserted by a party in order to protect himself from an agreement already arrived at. That, I think, is the only inference that can be drawn from the use by Mr. Gray in his letter of the phrase 'subject to full lease being agreed' because Mr. Gray is the person concerned; he is a layman; he is not a solicitor coming into a deal which has already been concluded between others and saying 'Well, I must protect these people because they have entered into an oral agreement. I will ensure that no note or memorandum comes into existence by heading the letter "subject to contract".' Here is a lay person writing his understanding of the situation as he sees it and he uses this phrase which in my opinion is only con-sistent with an intention to ensure that a contractual liability does not arise until a full lease has been agreed. That seems to me to be the weight that has to be attached to those words.
But it is by no means the end of the matter. Mr. Gray then goes on to set out the terms which he says are acceptable. I do not have to read them out in detail. It is clear that they deal with what would be the central points in any lease - the rent, the term and when it is to commence.
I entirely accept Mr. Farrell's submissions, supported by substantial authority, that the commencement date of the lease was specified not directly but inferentially in a memorandum that would satisfy the essential ingredients of an agreement for a lease.
One matter that is not included in the letter, of course, for the good reason that Mr. Gray did not know it, is the identity of the lessee. But it is sufficient to say that the rent, the term, the commencement of the term - the important matters in any tenancy agreement or lease - were set out as ones which he was prepared to accept.
Now, if one leaves aside those introductory words, 'subject to full lease being agreed'; if one assumes that those words were not there and if the case made on behalf of the Plaintiff were correct, that letter demanded a one-line reply: 'We agree. Send the documents to our solicitors'. The letter one gets in reply is: - "Thank you for your letter dated June 30 ... my comments are as follows:...". The comments were quite unnecessary. If the Plaintiff's case is correct, a simple statement in reply was required 'I agree'. Mr. Murray then goes on to pick out items with which he agrees, items 1, 2 and 3. Mr. Murray says he agreed to item 4 but I think he has inserted qualifications which are very important because he and Mr. Gray were probably thinking along roughly the same lines. They used the phrase 'full planning permission' by which they both meant a planning permission which would not be vulnerable to third party appeal but one which had been granted following notification of a decision so that there could be no appeal or one granted on appeal by An Bord Pleanala. I think that is what they meant. However, I do not attach much weight to that clause except to say that its actual tenor is not particularly con-sistent with the existence of a concluded agreement between the parties. Again, if there was then a concluded agreement between the parties, all Mr. Gray had to say was 'I agree'. End of story. "
However, in item 5 of his letter Mr. Murray goes on to refer to Mr. Gray's stipulation that there should be a deposit of three month. rent on signing the lease. He says that it is not normal practice for three months' rent to be paid in advance on signing the lease because 'you raised personal guarantees with me." What was meant by that? What could be meant by it except that Mr. Murray reasonably considered that he was still in negotiation with Mr. Gray. Mr. Murray was not accepting what Mr. Gray said and there was no reason why he should.
Mr. Gray was putting forward a term in his letter of this alleged agreement that a deposit was required as well as three months' rent in advance, a term which Mr. Murray considered unacceptable. Mr. Murray was entitled to consider the term unacceptable but the fact that he did consider it unacceptable is inconsistent with the existence of any concluded agreement between the parties. Mr. Murray also adds in his letter: "particularly, bearing in mind... personal guarantees with me", which is of con-siderable significance.
That evidence relates to the fact that there was continuing uncer-tainty as to who exactly was to be the lessee of this property assuming that this deal went through. This matter was of sub-stantial importance to the lessor (the Defendant in this case) and, again, it serves to distinguish this case from the 'subject to contract' cases referred to in the course of the argument. Those 'subject to contract' cases are invariably cases where the parties are selling property. Of course, once a person who is selling property has got his money that is the end of it as far as he is concerned. He could not care less who he has sold it to or what the purchaser does with the property.
Totally different considerations arise in the case of a lease. There the landlord is very much concerned with whom his tenant is and very much concerned with solvency. The more valuable the property the more exposed the landlord is to comment or criticism. If the lessor is a public body or a semi-State body, it is most important that it should know who the lessee is. In this case the earlier correspondence indicated that Mr. Murray might be dealing on his own behalf. There was then an indication of a Mr. Les Sutton coming in and then an indication of a company called South Frederick Holding Ltd. Then at some later stage, without notification to the landlord another company was brought into the picture and that company was the present Plaintiff, Silver Wraith Limited. It was perfectly obvious that Mr. Gray was very concerned as to the nature of the lessee. I accept what Mr Gray Said in relation to this matter and I do not think that he was seriously challenged about it. The lessee was certainly going to be a company and there would be a question as to who the shareholders were and what was the paid up capital of the company. And if the Defendant was still not one hundred per cent happy with the proposed company, there could well be a question of personal guarantees. The correspondence shows that all these matters were up in the air: that there had been no finality. In my view, that, again, is fatal to the existence of any concluded agreement between the parties.
In those circumstances, therefore, it seems to me that the Plaintiff's case fails in limine, as it were, because the Plaintiff failed to establish the existence of a concluded and binding agreement between the parties.
However, I should deal with the question of whether there existed a sufficient note or memorandum for the purpose of the Statute assuming that there had been a concluded and binding agreement between the parties.
Once one finds that there was no concluded and binding agreement between the parties, as I have no hesitation in finding, it becomes a matter of making certain assumptions which are in the teeth of the evidence. Assuming that one could say there was a concluded and binding agreement, it seems to me that the note or memorandum is fatally vitiated by the phrase 'subject to full lease being agreed because I can discern no significant difference between that phrase and the phrase 'subject to contract', a phrase which has in so many instances been held to be fatal to the existence of a note or memorandum.
The case on which Mr. Farrell relies, the English authority in the Chipperfields case, is one which seems to have been fully argued on the basis of whether there was a concluded agreement or not. The question whether that was a sufficient note or memorandum does not appear to have been argued. However, be that so or not, it would be subverting the line of authority to suppose that the phrase 'subject to full lease being agreed', which is stronger than 'subject to contract', would not have an equally fatal effect on a note or memorandum. It is hard to discern any difference between the two phrases which would make one fatal and the other not except that 'subject to contract' has so often been construed as having that effect that it has acquired legal significance. If the note or memorandum appears to deny the existence of a concluded agreement, then that is fatal to its being a sufficient note or memorandum. Apart from that, it is an essential feature of the note or memorandum that it should specify the parties and this it did not do and could not do in this case because there was no clarity about the proposed lessee. Mr. Farrell suggest that it incorporates the previous correspondence, which it does, and that hurdle could be surmounted by reading the correspondence which referred to the cinema premises. But it does not get rid of the difficulty about the lessee because there were two or more potential lessees mentioned in the earlier correspondence. So it seems to me that for both those reasons the letter relied on of 30th June 1986 could not be held to be a sufficient note or memorandum.
Finally, in relation to the question of part performance, even if it were not a sufficient note or memorandum, the Defendant might be r precluded from relying on that defence if there were sufficient acts of part performance to take the case out of the Statute. This... is the only aspect of the case which I confess to having some difficulty with.
In so far as the accountant's fees are concerned, there is no disputing the cogency of Mr. Geoghegan's observations that if that aspect were to be relevant, one would have expected it to be there before rather than after any agreement. It is hard to know what was thought to be achieved in getting the projections from the accountant if the Plaintiff was already contractually bound. If
Mr. Pattin had said that the project would be the greatest loss maker of all time, that £.1/2M would be lost instead of saying that i.1/2M would be made, as Mr. Pattin's somewhat sanguine estimate of the first year's operations suggested, it would have made no difference.
I am more concerned about the architect's situation because it seems to me that there may have been a change in the circumstances at a later stage of the transaction. However, the position is somewhat, cloudy because there is no doubt that in February this matter came back on the boil having been in abeyance for some time (there was another possible tenant on the horizon). When the matte. became active again in February, the understanding was that
Mr. Murray would try to get planning permission and Mr Gray gave him (Mr. Murray) an informal assurance that any expenses incurred in this regard would be recouped. In this regard Mr. Gray says he was thinking in terms of a few hundred pounds. Mr. Farrell makes the valid point that this was now not a question of a few hundred pounds once the Corporation's letter came in asking for further information. At that stage Mr. Murray undoubtedly wrote to Mr. Gray pointing out that it looked as if he was getting involved in more money, and we are now talking about some thousands of pounds. Mr. Murray made that point clear and also that he was unhappy to commit himself to this sort of expenditure without having a concluded agreement. When one bears in mind that since February Mr. Murray had committed himself to this project without any commitment at that stage from the Defendant Company, he undoubtedly felt (and I accept his evidence in this regard) that it was all over bar the shouting. Mr Murray felt at this stage "' that this matter would go through to finality. It is against that background that one has to view the subsequent incurring of obligations to the architect.
While it is a matter on which I have doubts, it seems to me that as a matter of probability the Plaintiff failed on that aspect of the case to establish that the expenditure incurred was unequivocally referable to the type of contract alleged. As I say, at that stage Mr. Murray felt that he was nearly home and that there was not much left to be ironed out in his negotiations with the Defendant Company. His own state of mind may have been even further than that; he may have thought that he had a binding agreement. For the reasons already given, however, I am satisfied that that was the situation. But assuming that it was the situation, I am still not satisfied that the Plaintiff has discharged the onus of proof which lies on him of showing sufficient acts of part performance to take the case out of the Statute.
I have only dealt with those two other aspects of the case in deference to the arguments of Counsel.
On the evidence I entertain no doubt that there was no concluded and enforceable agreement between the parties. Accordingly, the Plaintiff's claim must fail.